Stock markets advanced negociating with sharp gains. The good performance of Asian and American markets as well as the rise of oil in the Asian session mitigated the negative feelings that have dominated among European investors.
For oil recovery takes more solid and sustainable way will have to occur at least one of two conditions. The first is a change in the relationship between supply and demand. Given the recent statements by OPEC members (that oppose the cartel position to reduce their production) and to the increase in production from countries like Russia and Iraq (a highly unlikely scenario). The second is a Dollar devaluation, even on short-term, insofar as there is a negative correlation between the USD and Oil. This scenario seems more likely because, despite all the fundamental factors in the US currency (higher economic growth, higher interest rates, etc.), the dollar is vulnerable to a short-term correction after the strong gains accumulated in the last months.
The SP 500 Index (SPX) rallied a second day, wiping out its losses for the year, on speculation central banks will support growth even as the American economy shows signs of strength. Boosting US markets were the stabilization of oil prices, the minutes of the last meeting of the FED and some more technical aspects of the current situation. After a very volatile session, oil ended in 48.65 USD / barrel, reaching a minimum of 46.83 USD / barrel. The recovery of oil prices boosted the related sector, which was among the best performers of the session.
The minutes of the last meeting of the FED confirmed the optimism that this meeting (held on 17 December) had been on the market. The perception of investors regarding US monetary policy remained. The timing and the pace of rising interest rates will be benevolent to the financial markets than anticipated in December 2014. However, the FED has reserved some flexibility, which will allow to act in accordance with the evolution of the economy (notably employment and inflation) and the international situation.
Yesterday’s rise was also related with technical factors. Given the stabilization of oil prices and the minutes of the FED, it is not excluded that many short-term investors, the so-called fast money, have closed their selling positions and some have decided to increase their exposure to the equity market (buying stocks).